Q: There is so much conflicting information about carrying or not carrying workers' compensation insurance. What are the facts?

A: Workers' compensation is a state-regulated insurance program that pays medical bills and replaces some of an employee's lost wages if the employee is injured at work or has a work-related illness.

Participation by employers in the state's worker's compensation system is voluntary.

Those who choose to have this insurance coverage may either purchase the policy from private companies or, if they can satisfy the requirements of the Texas Workers' Compensation Act, they can self-insure.

When an employee is unable to work because of a job-related injury or illness, that employee is going to suffer lost wages and possible medical expenses.

If you provide workers' compensation for your employees, the insurance will cover these losses, and you will be protected against legal action resulting from any damages suffered by your employee.

Employers who choose not to carry workers' comp, sometimes referred to as going bare, face unlimited liability if an injured employee can show the employer was negligent.

When such cases are tried, in addition to lost wages and medical costs, the employee may be awarded a monetary judgment for pain and suffering or punitive damages.

The Texas Department of Insurance can provide you with a list of private companies qualified to write workers' compensation insurance.

As the employer providing the coverage, you will be required to report all injuries resulting in lost time and/or medical care to the Workers' Compensation Commission.

Your insurance carrier can provide the necessary forms to make such reports.

Some work-related injuries or illnesses can result in extensive costs, and without any protection against damages suffered by the employee or possible legal action, you could be subject to major claims.

So, while it is perfectly legal in Texas not to carry this coverage, don't make that decision before you talk it over with your insurance carrier and you are certain you know all the pros and cons as they apply to your situation.

For more information, contact the Texas Workers' Compensation Commission at 512-804-4000.

Don Doggett is a management counselor for SCORE, Counselors to America's Small Business, a volunteer, nonprofit association and a partner of the U.S. Small Business Association. For information, call 713-773-6565. Information here is intended to provide general information. Send your small-business questions to Small Business, Houston Chronicle, P.O. Box 4260, Houston 77210.